Posts Tagged 'Prop 65 Reform'

One of the unfortunate and unintended consequences of California’s extensive regulatory efforts has been to create a small industry of plaintiffs’ law firms and repeat clients apparently determined to extract settlement money from businesses. Proposition 65 was implemented with the best spirit of consumer protection in mind. But those regulations have since transmogrified into tools that primarily profit a small group of plaintiffs’ attorneys, to an extent that has become increasingly burdensome for consumer product manufacturers, resellers and property owners.

Proposition 65 provides for private enforcement actions, which enable individuals or groups to enforce the statutes against consumer products companies, property owners and others. Prop 65 is a “right to know” law intended to help consumers make informed decisions about their purchases. The combination of a growing list of substances, difficulty in determining exposure levels with scientific certainty, sparse judicial and government oversight, and a right to attorneys’ fee awards under the statute, have transformed Prop 65 into a lucrative business model for a handful of law firms and closely-related consumer groups. Hundreds of Prop 65 actions are settled each year, with about 70% of the settlement money paid being allocated to attorneys’ fees for the plaintiffs’ lawyers.

California’s published statistics from 2013-2017 show an accelerating trend of more Notices of Violations filed each year. In 2016 alone, for example, 1,576 Notices of Violation were sent to businesses selling products in California, while 2,710 Notices of Violation were sent in 2017. The attorneys’ fee provisions of Prop 65 undoubtedly have much to do with that trend. In 2016, 760 judgments or settlements were reached totaling $30,150,111, of which $20,062,247 was paid as attorneys’ fees to plaintiffs’ lawyers. In 2017, 688 judgments or settlements were reached totaling $25,767,500, of which $19,486,362 was paid as attorneys’ fees to plaintiffs’ lawyers.

With that kind of monetary motivation, it is easy to see why some law firms make a practice of filing and serving Prop 65 Notices of Violations. This effectively creates a small industry of lawyers who pursue Prop 65 claims, often for a small group of repeat-plaintiffs who appear again and again with the same lawyers. Public records identify at least the following law firms, attorneys and their associated plaintiff clients, who pursue multiple Prop 65 claims:

If you are unfortunate enough to receive a Prop 65 Notice of Violation from one of these lawyers or plaintiffs, or from any others, don’t ignore it. The problem will probably not go away by ignoring it, and prompt action can help keep the matter from getting far worse. Handling it yourself is also usually not a great plan. Remember that the plaintiffs who sent the Notice of Violation are almost always represented by counsel experienced in Prop 65 matters. You should contact experienced counsel to help you respond promptly and handle the matter with minimum disruption to your business.

Conkle, Kremer & Engel attorneys have many years of experience advising clients about how to avoid regulatory compliance issues, and we regularly defend clients against Notices of Violations of Proposition 65 and other California regulations. CK&E uses its extensive experience to help clients who are accused of regulatory violations quickly and effectively resolve claims, so clients can focus on growing their business.

Conkle, Kremer & Engel attorneys were featured speakers at the Beauty Industry West presentation “Navigating in Challenging Regulatory Waters: Updates on California and Federal Compliance.” About 150 entrepreneurs, consultants, executives and beauty industry professionals attended the event at the Crowne Plaza Hotel LAX in Los Angeles on October 15, 2013, which included a valuable networking session and a post-presentation Q&A.

CK&E’s presentation about legal regulatory issues for personal care product companies doing business in California included an overview of the California Organic Products Act (COPA), Proposition 65 (California’s Safe Drinking Water and Toxic Enforcement Act) and California’s Green Chemistry Initiative including the new Safer Consumer Products Regulations. Conkle, Kremer & Engel’s materials from the BIW event, including the “Navigating Civil Regulatory Issues” presentation and its “Resource Guide for Regulatory Compliance,” are available for download on CK&E’s Regulatory Compliance web page.

Co-presenter Donald Frey, an industry veteran, regulatory expert and product development and innovation consultant, presented on key regulatory issues from the business perspective, including how to effectively deal with regulators. Mr. Frey has generously agreed to share his presentation, available for download here.

Among the questions and answers covered after the presentation were the addition of titanium dioxide (airborne, unbound particles of respirable size) to the Proposition 65 list of chemicals, responsible entities for purposes of compliance with the Safer Consumer Products Regulations, and the determination of organic ingredients under the National Organic Program standards.

Conkle, Kremer & Engel attorneys are frequent speakers at events of interest to the beauty industry due to their expertise in representing manufacturers, distributors, suppliers, retailers and salons in all aspects of their business, including the challenges of regulatory compliance.

However, as AB 227 was enacted, only limited types of businesses are likely to benefit. The amendments are very narrow, covering only certain exposures to alcohol or food-related chemicals, vehicle exhaust and tobacco smoke. Thus, the only businesses that are likely to benefit from the amendments are bars, restaurants, parking garages, and those who own or operate premises where smoking is permitted.

In general, the amendments establish a new “safe harbor”: AB 227 prohibits a Prop 65 lawsuit from being filed by a private enforcer over an alleged failure to provide a warning concerning one of the specified exposures, if the business takes specified action within 14 days of receipt of the notice of violation. The targeted business can escape a Prop 65 action if, within 14 days, the business: (1) actually corrects the alleged violation; (2) agrees to pay a civil penalty of $500 per facility or premises within 30 days; and (3) submits a “Proof of Compliance” notifying the private enforcer that the violation has been corrected. If the business takes the so-called “safe harbor” action in response to the notice of violation alleging failure to warn about exposure to alcohol or food-related chemicals, vehicle exhaust or tobacco smoke, the private enforcer is precluded from filing a lawsuit or collect additional civil penalties or attorneys’ fees from the business.

These types of piecemeal amendments to Prop 65 may increase public demand and political pressure for additional reform. In May 2013, Governor Brown proposed sweeping, substantive reform to Prop 65, intended to end decades of “frivolous ‘shake-down’ lawsuits” by Prop 65 bounty hunters and their lawyers. But by September 2013, those efforts stalled as stakeholders involved in the reform effort were unable to reach the consensus needed to generate the two-thirds majority approval that is required for any amendment of Prop 65 in the Legislature.

Conkle, Kremer & Engel constantly tracks the latest developments in Prop 65 in order to provide expert guidance and counseling to clients. This latest amendment is a demonstration that businesses who receive a Prop 65 warning should immediately seek qualified legal counsel to help them avoid liability and unnecessary payments to Prop 65 claimants and their lawyers. In fact, businesses are well advised to consult qualified legal counsel to review their compliance with Prop 65 before an immediate response becomes necessary.

California’s now-infamous Proposition 65 (Prop. 65, Cal. Health & Safety Code § 25249.5) allows a private citizen to file a lawsuit against any business that fails to post adequate warnings about the presence of chemicals known to cause cancer or reproductive harm. The private enforcer may seek an injunction, penalties of up to $2500 per violation, per day, and an award of attorneys’ fees.

Assembly Member Mike Gatto (43rd District of California) recently proposed legislation, Assembly Bill 227, that would reform Prop. 65 by providing a “safe harbor” in the form of a 14-day period for businesses to correct alleged violations. If enacted as proposed, a business who receives a demand under Prop. 65 would have a brief opportunity to demonstrate its compliance with Prop. 65 requirements to the California State Attorney General, or the responsible city attorney or district attorney. If the business takes advantage of that “safe harbor” then the claimant would be barred from filing a lawsuit against that business.

While the purpose of Prop. 65’s private enforcement provision is to allow private citizens to act on behalf of the public to ensure warnings are properly posted, supporters of AB 227 criticize Prop. 65 as a “bounty hunter” statute that primarily benefits plaintiff’s attorneys. In 2011, businesses paid a total of nearly $16 million to settle lawsuits brought by private citizens, of which almost $12 million was paid to the plaintiffs’ attorneys. In fact, nearly half of the attorneys’ fees were paid to a single firm: The Chanler Group.

AB 227 would give businesses the opportunity to come into compliance with Prop. 65 warning requirements without paying exorbitant settlement fees to prevent costly litigation. But businesses would have to take swift action. As CK&E attorneys John A. Conkle, Amy Burke and Mark Riedel discussed in their November 2012 presentation to the Personal Care Products Council, What’s Your Game Plan?, it is important for businesses to develop strategies for ensuring regulatory compliance and for handling notices of violation quickly and efficiently. AB 227, if signed into law, would be another reason that businesses should prepare contingency plans for the day that they receive a notice of violation from plaintiffs seeking to take advantage of Prop. 65 — a business could avoid being sued at all if it responds quickly and correctly to take advantage of the safe harbor. CK&E advises clients in regulatory compliance, responding to warning and demand letters, and developing an individualized game plan to suit each client’s needs.